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Archive for July, 2012

The LAUSD is ready to test a new teacher evaluation process.

Nothing wrong with that.

But the proposed Teacher Growth & Development Cycle may do more to keep principals and administrators busy rather than providing a sound basis for evaluating teachers. It replaces a 3-page evaluation form with one that is 30 pages.

As one who has written many evaluations and been on the receiving end of quite a few, I can safely say that if you go beyond 5 or 6 pages, the law of diminishing returns sets in.  There is no job in the world that requires more than a half-dozen pages of intelligent questions and analysis to get to the bottom of an employee’s performance.

The LAUSD employs approximately 33,000 teachers in 771 schools.  At 30 pages per teacher, that’s 990,000 pages to be completed or reviewed by 771 principals, or 1,284 per principal. No doubt, some of the work will be delegated to staff, or at least I hope so.

In any event, by page 15, there is a good chance that the evaluator will be inclined to rush through the remaining pages so they can finish it and get on to the next one, not exactly conducive to a meaningful and fair assessment.

I am sure there are some good questions sprinkled throughout the evaluation, but there are bound to be overlapping ones as well, not to mention some that split hairs. 

Unfortunately, the link in the Daily News article covering the Teacher Growth & Development Cycle does not take you to the details, only a synopsis. The LAUSD website does not appear to offer any information.

The synopsis hints that the process deals with technique rather than results. That’s disturbing, but it would not surprise me; the LAUSD has a history of being more concerned with form over substance.

It would be nice to give it a public airing since the cost of administering the voluminous program could be high.

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You will not find a statue of Benedict Arnold at West Point’s Michie Stadium extolling the USMA’s Black Knights football team. 

For that matter, I am unaware of any statue or icon dedicated to the former Continental Army general who became synonymous with treason, not even in England with whom he cast his lot in 1779 for 10,000 pounds and a commission as a general in His Majesty’s army.

Few people remember or have any knowledge of Arnold’s record beyond his attempt to deliver the bastion of West Point to the British.

We should.

His heroics and leadership not only saved the northern colonies from falling , but his personal valor at Saratoga delivered a punishing defeat to the British, an event instrumental in France’s decision to recognize and support our fledging country. 

If Arnold had been anything less than successful in those critical years, we would be speaking bloody English today; ordering grande tea blends at Starbucks, drinking warm beer and tolerating awful cuisine.  I won’t even mention what it would have meant to dental care.

Despite preserving the American Revolution, he will always be remembered as a villain, his image relegated to the trash heap of history.

That brings us to 2012 and Joe Paterno.

Coach Paterno’s statue sits in front of Beaver Stadium, with an upraised arm and finger pointing in a classic “we’re number one” pose.  The statue has as its backdrop a mural of several Penn State football players following him on to the field.

Inspirational….or, at least it was until recently.

Joe Paterno Statue

Should the statue be removed?

Will keeping it be a slap in the face of the victims?

The Penn State Board of Trustees is reluctant to remove it.

That is unfortunate.  Although removing it or the Paterno name from campus facilities cannot reverse the horrific acts, covered up by the school’s administration and the storied coach (according to the independent investigation conducted by former FBI Director Louis Freeh), it is important to send a message that abuse and molestation cannot be tolerated.

Whether Paterno’s teams won 409 games or 4,009, that achievement went right down the drain as the water in the showers used by Jerry Sandusky when he molested his victims.

Penn State will continue to offer a fine education regardless of what happens to the bronze statue, but its reputation will take longer to recover with each day the Paterno name and image are part of the campus.

Will Penn State alumni stand up and demand that the Board do the right thing?  Or will they put football ahead of ethics and morality, as Paterno and others did?

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The Daily News and the Los Angeles Times have been awash with articles dealing with municipal bankruptcy lately.

The top budget expert at Los Angeles City Hall said Friday that the municipal government is climbing out of its fiscal sinkhole –- and would be foolish to file for bankruptcy as a way of solving its problems.

Appearing before the council, Santana said the city already has taken steps to cut the size of the work force by laying off 100 workers, closing small departments and letting 2,400 workers retire with full pension benefits up to five years early. Another 761 job cuts are planned in coming weeks -– a move that is controversial among some council members.

“We are on our way to financial stability,” Santana said. “So bankruptcy is further away now than it  was possibly a year ago.”

That was from a Los Angeles Times article from May 7, 2010 – not 2012.

So what happened to the financial stability our CAO was crowing about?

From the Times, June 27, 2012: Miguel Santana, Los Angeles’ chief administrative officer, sees Stockton as a lesson in what can happen if the city doesn’t continue making adjustments to match declining revenue. In a budget outlook prepared in April, Santana alluded to Stockton’s financial meltdown in urging the mayor and City Council to push for higher taxes and spending reductions over the next four years.

That hardly sounds like an advertisement for financial stability. Was Santana whistling in the dark back in 2010?

Were the mayor and the City Council blowing smoke all these years as they kept deferring expenses, such as banked LAPD overtime and early retirement buyouts, to future periods?

Was anyone at City Hall taking the financial crisis facing the city seriously? 

Santana, the Council and the mayor are relying on the if-if strategy of survival.

If we can raise taxes and if the unions make meaningful concessions, then we can avoid bankruptcy.

Yup, we can bank on that just as we can with “if pigs could fly.”

Los Angeles is not in as deep a hole as Stockton or San Bernardino, the latter not able to make the upcoming August payroll. But both of those cities share a common predicament with Los Angeles: high labor costs and benefits, along with a dwindling tax base.

In San Bernardino, there are accusations of budget falsification.

According to the San Bernardino SunCouncilman Fred Shorett blasted city staffers for what he said was evidence of at least incompetency.

We haven’t had good, solid information over the last 16 years,” he said. “Why? That’s up for determination. I don’t believe they’re falsified. I believe there’s maybe some incompetency or ineptness or trying to stretch the truth, trying to make things look better.”

Sounds like the City of Los Angeles budget assumptions since Villaraigosa has been the mayor.

Our city’s first line of defense is virtual bankruptcy, or Detroitomics.  I’ve written about that before. Allow services to erode through layoffs and furloughs to the point where residents become accustomed to a low standard. 

That strategy has its limits.  Eventually Los Angeles will resemble Detroit, but with beaches and good weather. Businesses and people of even moderate means will move out, finally realizing that there is little value in the taxes they pay.  A day at the beach under sunny skies does not pay the bills or make the payroll (we only wish it could).

About 450 miles to the north of Los Angeles, the City of Reno offered Apple $89 million in tax breaks.  In return, Apple agreed to build  data and purchasing centers in and near the city.  It will amount to a $1 billion investment in the region over the next ten years, not to mention quality permanent employment opportunities and long-term construction jobs.

Always thinking big, Mayor Villaraigosa and the City Council settled for waiving gross receipts taxes to bring car dealerships back to Los Angeles. The city hopes to increase sales tax revenue from $3.6 million per year to $5.4 million.

Reno will be flying with Apple while LA will still be trying to figure out how to make pigs fly.

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The board of directors of the Los Angeles Police Protective League weighed in on a bill passed by Congress  – HR 4348  – signed by the President on July 6th.

As far as bills go, it is not in the league of the Affordable Health Care Act, but its passage was important to the White House as part of the administration’s plan to provide jobs through infrastructure improvement projects. It took bi-partisan support to craft it; President Obama praised Senator Boxer and Representative Mica for their leadership.

The LAPPL chose to twist one of the bill’s provisions into a reason to defend its fanciful position regarding the earnings rate assumption used for projecting the growth of the Police and Fire Pension System’s assets.  The earnings rate assumption is a critical component in determining the plan’s unfunded liability.

The higher the rate assumption, the lower the unfunded liability and, all other things being equal, the lower the contribution the city has to make to support pension benefits. The bill allows private defined benefit plans to use a computation that raises their rate assumption. I will tell you why the seemingly unrelated provision is in the bill a little later.

There has been much controversy over the earnings rates used by public pension funds because of the significant effect they can have on a state’s or city’s financial position.

The public unions prefer a high rate in order to disguise and understate the potential financial risk  state and local governments face – that is, the residents, stakeholders and taxpayers who are liable for the shortfalls in funding guaranteed benefits to the participants. Union leaders would rather hide the truth from the people than get them riled at the prospects for a financial meltdown capable of taking down a city. That would not sit well in a city like Los Angeles where all of the elected officials depend on support from public employee unions to fuel their campaigns.  These same officials also negotiate compensation and benefit packages for the employees.

In its blogpost, the LAPPL referred to a New York Times article that claimed the new method of calculation – allowing firms to use a 25-year interest rate average instead of the low rates that have prevailed for several years – would produce an earnings rate of 7%. The LAPPL strongly implied hypocrisy was at work.  After all, key supporters of the new calculation generally have been the same  ones pressing for legislation to require public employee unions to lower their estimates.

There are a couple of very important facts the critics failed to disclose in their post………. deliberately, I’m sure.

Let me say that I do not like the concept of using a 25-year average.  In the world economy of today, twenty-five years ago is the equivalent of prehistoric times; ten years ago is ancient history.  The key players and the amount of influence they wield have changed dramatically.  There is little to compare between the present and over a decade ago, yet too many people have a soft spot for historical data. It is easier to get your hands around the past than project the future, an uncertain one at that.

Despite my reservations with the historically based calculation, the end result estimated to be 7% is still measurably lower than the 7.75% rate currently in use by the city’s sworn and civilian pension systems. Three-fourths of a point may not sound like much, but it could increase the unfunded liability for Los Angeles by at least $500 million, an amount that would have to come from the general fund.  That’s not good news when services have already been slashed due to layoffs.

The Los Angeles Civilian Employee Retirement System (LACERS) only recently cut its assumption from 8% to 7.75%.  At that, the decrease will be phased in over five years, deferring the inevitable pain of higher employer (that’s us) contributions to later years.  The only strategy City Hall knows when it comes to managing deficits is deferral.

It is highly likely that HR 4348’s new rate assumption calculation will drop below 7% as older higher interest periods drop from the calculation and are replaced by the ultra-low rates of recent years.  For example, the prime rate was in excess of 10% 25 years ago.  It is 3.25% currently. Rates in general reflect this steep decline.

It would not surprise me to see it land at 6.5%, a level consistent with the view of Mayor Bloomberg of New York.  If 6.5% were in effect for Los Angeles, the unfunded liability could easily grow by another $1 billion. Where do you think the City Council will find that amount of money in the years to come?

The LAPPL post went on to criticize proponents of using a low risk-free rate as the earnings assumption.  I agree we do not have to go that low, but at least the theory of using a risk-free rate is more logical than the politically motivated rates cooked up by actuarial firms hired by public union boards.

When a plan offers a guaranteed benefit regardless of market performance, it should use conservative estimates to assure funding is also guaranteed. In a public plan, anything less than a conservative assumption exposes the taxpayers to bailing out the beneficiaries in the event of a market collapse or a prolonged downturn.

So why was this 25-year average provision included in HR 4348, a bill designed to fund highway improvements, not to mention preventing the doubling of student loan rates (yet another unrelated provision)?

The higher rate of return reduces corporate deductions, thereby increasing tax revenue.  The bill also increases the premiums corporate plans pay into the Pension Benefit Guarantee Corporation, the insurance fund designed to lessen taxpayer exposure to private sector pension failures. Wouldn’t it be nice if public employee plans paid a premium into a comparable program?

These changes will provide in excess of $18 billion in funding to the highway projects over the next ten years, enough to balance revenue with costs.

It was a good deal for all concerned.

Was it the best deal?

Is there ever such a thing as a “best deal?”

Public union members are rightfully concerned about their pension benefits.  However, union leaders are downright defensive if anyone should challenge their tenuous assumptions.  They will react as Dracula does at the sight of a crucifix.

These leaders will always remind their members of state constitutional protection of public pension and benefit contracts.

But contracts can be worthless if one of the parties cannot perform.  If taxpayers do not want to cover deficits created by underfunded plans, bankruptcy will result and a judge will lower the benefits.

Union members should ask if the deal they have is too good to be true.  Bernie Madoff promised high returns; his investors only wish they had asked that question.

The late Jim Valvano, whose NC State basketball team pulled off one of the greatest upsets in Final Four history, rode a surge of popularity after winning the national championship. Seven years later, he was forced to resign in the wake of recruiting violation allegations.  The NCAA cleared him, but NC State wanted him out. He wrote an autobiography: They Gave Me a Lifetime Contract, and Then Declared Me Dead.

Union members should consider making major concessions in the form of higher employee contributions lest a bankruptcy judge declares their plans dead.

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The unions spoke and Greuel, Garcetti and Perry buckled under.

Labor leaders asked local officials to refuse campaign contributions from Walmart and the three City Hall regulars complied. Kevin James, the sole outsider in the race, was critical of their decision.

According to an article in Blogdowntown, Greuel said Walmart has been getting special treatment for “far too long.”

Garcetti linked Walmart with a “race to the bottom” as far as wages go.

Perry said she wanted jobs that offered a “reasonable quality of life.”

The three candidates are the same ones who grant tax breaks to developers who create low-wage jobs, who accept union money and hand out generous benefits to their members, and have much to do with the deterioration of municipal services to the citizens of Los Angeles, many of whom are part of the middle class they purport to support.

The most laughable comment came from Maria Elena Durazo, executive secretary-treasurer of the Los Angeles County Federation of Labor: “It doesn’t take campaign finance reform to prevent Walmart from wrapping its tentacles around our political system in L.A. County.”

If Walmart has tentacles, then the public unions are giant anacondas crushing the city and suffocating the residents.

And why pick on Walmart?  Why not Target? The retail industry as a whole pays lower than average wages, not to mention the hotel, tourism and other segments that depend on unskilled or semiskilled labor. These industries are vital to the Los Angeles economy. The City Council does not appear to have a problem with their expansion in general.

At least two of these three insider candidates will be out of a job soon. 

You may see them cleaning a spill on aisle number nine at a Walmart near you.

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